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E.U. Examines France's DVD Tax

An anonymous complaint has been filed with the E.U. while "cultural exception" gains support.

PARIS -- France's film financing system is again under fire after an anonymous complaint was filed with the EU, citing the tax on on the sale and rentals of DVDs and VODs.

That tax, which amounts to 2 percent of a sales price for mainstream films and 10 percent for adult videos and is paid by vendors such as clubs, supermarkets or streaming websites, is fed into the National Cinema Center (CNC), which passes it onto filmmakers. The tax resulted in €31 million for the CNC film fund in 2012 alone.

The complaint, first reported by news channel BFMTV, says the tax is illegal under European law because France did not properly notify the EU commission in Brussels, stating that while Paris had originally received the OK for the tax from the EU it has substantially modified the structure of the tax over time without consulting Brussels, thereby making the tax illegal.

One of the main points of the complaint is that the government of President Francois Hollande diverted €150 million of the CNC fund to cut the country’s public debt as it enacted austerity measures across the board in 2012. Since the tax is no longer being put to its original use of funding film, and is instead going towards the government as a whole, it is illegal under EU law, the complaint alleges, though that diversion is temporary for the 2013 fiscal year.

France has also been challenging the EU to limit the scope of the free-trade talks between Europe and the United States, allowing for the traditional “cultural exception” that encompasses film, books and other creative output to be exempt from discussion. The EU voted in favor of France’s position last week, and though non-binding, it shows Europe’s support for keeping culture out of commodity talks.

Last week in Cannes, big American names came out in favor of the French position. Harvey Weinstein made a surprise appearance at a CNC meeting to express his support and jury president Steven Spielberg advocated the exception during his closing ceremony speech.

"The cultural exception encourages filmmakers to make films about their own culture," said Weinstein, who appeared alongside French culture minister Aurelie Filippetti while she presented a petition with over 5,000 signatures in support. "The most important thing is to preserve the cultural films because it's good for business, too."

France has threatened to block the start of the talks unless the “cultural exception” that allows the government to subsidize television programming and film production through the CNC fund. The CNC fund collects taxes from French broadcasters, movie theater ticket sales and DVD and VOD sales. It has been working to add ISPs to this equation, but has faced opposition from the EU, and is considering adding a tax to content delivery devices such as smartphones and tablets, as well.

The final decision on the EU’s “cultural exception” position is due June 14, while the talks with the U.S. are set to begin in July.